The tightening of mortgage financing due to the rise in interest rates has been causing home purchases to fall for seven months. The data published this Tuesday by the INE reveal that in August only 49,252 purchase and sale operations were carried out, 14.4% less than in the same month a year ago, which means the biggest collapse since August 2020, in the middle of the pandemic. .
This is the steepest year-on-year decline since January 2021 and much higher than that recorded the previous month, when home sales fell by 10.5% in July in Spain. And the drop in sales has occurred in new homes (down 7.3% compared to a year ago to only 9,400 transactions) but above all in second-hand homes, which fell 16% to 39,800 transactions.
The collapse has been repeated in almost all the autonomous communities, with the exception of Navarra and Asturias, where sales increased by 8.7% and 3.7% respectively. The most intense falls occurred in the Balearic Islands (-38%), the Canary Islands (-26%), the Community of Madrid (-23%) and Catalonia (-17%).
Andalusia was the region that carried out the most transactions in August, with 10,500 sales, followed by the Valencian Community, Catalonia and Madrid. If the data is analyzed by number of sales per 100,000 inhabitants, where the most operations were signed was in the Valencian Community, Andalusia and Cantabria.
In a month-on-month rate (August over July), home sales rose 2%, the lowest increase in this month since 2021. According to the INE, two out of every three home sales carried out in August (68.3%) were carried out between natural persons. In total, 33,631 operations of this type were carried out between natural persons in August, 15.2% less than in the same month of 2022.
The reduction in mortgages occurs in a context in which the interests that banks generally offer to the average customer have doubled. According to the latest statistics from the INE corresponding to the month of July, the average initial interest rate on mortgage loans was 3.24%, the highest since April 2017. That is, in just one year the price has almost doubled when compared to the average interest of 1.92% recorded in July 2022.
Credit tightens and demand falls
In this context, the Bank of Spain also confirmed this Tuesday that the supply of credit has maintained its pace of tightening in the third quarter (July to September) and demand fell again in this period. The Bank Loan Survey prepared by the supervisor reveals that both the granting criteria and the general conditions of new loans were generally tightened for the sixth consecutive quarter, in parallel with the increase in interest rates undertaken by the European Central Bank ( ECB). Regarding the criteria, the level of tightening was similar to the previous quarter in the case of companies, while in credit to households it was somewhat more pronounced. In the case of particular conditions, the evolution was more moderate for companies while it was similar for households.
After several years of record activity, all experts pointed to a harsh cooling of the Spanish real estate market for this year. However, this slowdown is only happening halfway: although the number of purchase and sale operations or the signing of mortgages has been paralyzed in recent months, housing prices are not adjusting, by any means, at the same speed. Nor does it have any signs of doing so in the medium term. This is what the Bank of Spain considers in an analysis of the sector that it published a few weeks ago, in which it made it clear that compared to the logic that pointed to a drop in demand due to the rise in interest rates and, therefore, With greater pressure on prices, the reality is very different.
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